The Verkhovna Rada of Ukraine has approved amendments to the law that limit mandatory enhanced financial monitoring of politically exposed persons (PEPs) to 12 months after they cease to perform prominent public functions.
Lawmakers included this amendment when adopting the law on the taxation of income earned through digital platforms.
Under the new rules, after the 12-month period ends, banks and other entities conducting primary financial monitoring will be able to continue applying enhanced control measures only if there is a justified and documented high or unacceptably high level of risk, as determined by the results of an individual client assessment.
Financial institutions will also be required to notify the client in writing of the reasons for continuing such monitoring.
The law specifically states that the mere fact that a person falls under the PEP category one year after leaving office cannot be the sole or sufficient basis for applying enhanced financial monitoring measures to that person, their family members, or related parties.
In addition, the Verkhovna Rada supported a provision that classifies the heads and board members of state-owned banks as politically exposed persons.
According to data previously published based on YouControl analytics, there are approximately 30,000 politically exposed persons in Ukraine and another 140,000 individuals associated with them.
The PEP category includes individuals who hold or have previously held important government positions, including presidents, prime ministers, ministers and their deputies, members of parliament, high-ranking officials of judicial, law enforcement, and defense agencies, the leadership of the National Bank of Ukraine, and other high-level officials. This status also applies to their family members and associated individuals.
It should be noted that Ukrainian Law No. 361-IX on financial monitoring originally provided for lifetime PEP status. In November 2022, this approach was changed to a three-year period of enhanced monitoring following the completion of public duties. However, as early as 2023, the Verkhovna Rada reinstated lifetime PEP status in accordance with Ukraine’s obligations to the IMF. The new changes effectively establish a risk-based approach one year after leaving office.
